YFI and The Industrialization of Yield Farming

In just two months Yearn went from a relatively unknown lending aggregator to a $390 million DeFi powerhouse at the center of the hottest trend in the industry today - yield farming. Yearn has dominated yield farming so convincingly that some have conceptualized its token, YFI, as crypto’s Yield Farming Index.

But with such a sudden rise it’s worth exploring the hard questions about Yearn’s value, impact, risks, and opportunities ahead.

It’s time to unpack one of DeFi’s most complex protocols on the market.

The Birth and Rise of YFI

On July 16, Yearn was a simple DeFi lending aggregator designed to optimize yields for users. It had $8 million in assets under management and had earned in aggregate 10.58% APY for its liquidity providers since its January launch. Most importantly though, it had no token.

This all changed July 17, when yearn.finance founder Andre Conje released the now-infamous blog post titled “YFI”. Aimed at transitioning control over the yearn.finance protocol to its users, Cronje laid out a plan for users to farm YFI through providing liquidity to Curve and Balancer pools. In what may have been the first truly fair launch in years, Cronje allocated himself zero YFI tokens, forgoing any funding rounds, advisor tokens, premines, or anything else. All YFI tokens were distributed to users of the yearn.finance protocol.

A month later the purportedly “completely valueless token” was worth $390 million and governing a $770 million industrial-scale yield farming machine. And it’s printing money for its token holders to the tune of ~$20 million annualized.